According to BVSC, the structural shift towards modern grocery is an inevitable trend and this is where Bach Hoa Xanh is looking for the most suitable model.
In the second quarter of 2022, the pre-tax profit of The Gioi Di Dong and Dien May Xanh chains increased impressively, to a new record of VND2,832 billion, equivalent to an increase of more than 38% compared to the same period in 2021 and an increase of nearly 3%. compared to the previous quarter. This result was recorded despite this being the low business season of the year. The driving force for the increase in profit came from the continued increase in market share and strict cost control by the company, thereby more than making up for the narrowing of gross profit margin.
The updated report of Bao Viet Securities (BVSC) assesses that the Bach Hoa Xanh store chain is undergoing an active restructuring process, including changing the layout and closing inefficient stores in the second quarter of this year. via. According to estimates, Bach Hoa Xanh recorded a rather large loss of 1,130 billion dong in Q2, reducing MWG’s net profit in general. In which, the one-time cost from closing stores is 264 billion VND, while the operating loss including expenses related to layout changes is 866 billion VND, higher than the loss of 759 billion VND in the previous quarter. before.
However, on the positive side, BVSC said that Bach Hoa Xanh’s June revenue still reached VND 2,300 billion, not decreasing compared to the previous month despite the reduction of up to 251 stores. Quarter 2 gross profit margin was kept stable at 25%. More impressively, the July revenue of Bach Hoa Xanh chain also increased to 2,350 billion, up 2.2% compared to the previous month despite cutting about 150 more stores.
It can be seen that revenue per store has steadily improved for the beginning of the year, even reaching the year-end revenue target of 1.3 billion dong/store from July. This is driven by increase in customer traffic and cart size. With a forecast that the trend will remain in August, MWG’s management expects this number to reach 1.5 billion/store in the fourth quarter of 2022, an increase of 50% since the beginning of the year. Excluding restructuring costs including costs related to store closures and layout changes, BVSC believes that Bach Hoa Xanh’s profit margin has improved over time and will be more clearly reflected in the coming months. next.
In the second half of 2022, BVSC expects the Mobile World and Bach Hoa Xanh chains to grow optimistically thanks to the peak season and continued benefits from market consolidation.
Specifically, Q3 revenue growth was supported by a rebound in demand for technology products as the back-to-school season approaches and consumers return from the summer. Meanwhile, the fourth quarter of this year is somewhat more special because the Lunar New Year of 2023 will come early in the 3rd week of January 2023. In addition, the World Cup takes place from late November to mid-December. Therefore, BVSC expects Q4 revenue and especially the November-December sales season to be very strong, different from the peak season in normal years. falls in December-January.
At the same time, MWG is in a good position to benefit from market consolidation.
In the ICT market, BVSC expects MWG to drive a strong increase in market share, mainly supported by the outstanding consumption of Apple products. The Company’s Apple market share is expected to expand further from the current 30%. On the side of the company, Apple has shown obvious efforts such as cutting the launch time between Vietnam and higher-end markets and further diversifying the production of some products to Vietnam. The portable market (previously accounting for 50% of Apple’s market share in Vietnam) is likely to continue to shrink further, which also benefits MWG. On the retailer side, MWG has carefully prepared to gain more market share, aiming to increase the number of TopZone stores from the current 50 to 100, along with upgrading the existing stores in Mobile World and Dien May Xanh before the launch of iPhone 14. Whereby,
In the electronics market (CE). Dien May Xanh Supermini (DMS) is proving its ability to reach customers in remote areas very well, as evidenced by its revenue in the first half of 2022, skyrocketing by 91% over the same period, a sudden increase compared to the previous year. 14% growth of Dien May Xanh’s total revenue. In BVSC’s view, DMS not only helps Dien May Xanh promote the consolidation of the CE market, but also helps expand Dien May Xanh’s profit margin due to a larger contribution from high-margin home appliances.
On the other hand, Bach Hoa Xanh chain will record a profit in the fourth quarter after restructuring. This also implies that this is the strong growth driver of MWG from 2023 onwards. As we move into the optimization phase, revenue/store is expected to continue to improve further, driven by an increase in both visitor traffic and cart size. Gross profit margin will also improve, thanks to reduced pressure from inventory clearance and disruption from layout changes. The bargaining power is also higher with suppliers as the SKU portfolio is more condensed from around 5,000 to 2,000-3,000 while minimizing spoilage and discounts through more accurate forecasting. Besides, operating costs will also be better controlled by cutting low efficiency stores, increasing employee productivity and contributing more from online sales.
All in all, BVSC forecasts that MWG’s net profit in the second half of 2022 will grow impressively by 64% year-on-year to VND3,850 billion. For the whole year of 2022, the report forecasts net profit will be at VND 6,424 billion, up 31% compared to 2021. Strongly supported by Bach Hoa Xanh’s shift from loss to profit, BVSC continues to forecast reported that net profit in 2023 increased by 36% to VND 8,924 billion.
Longer-term story ahead, where Bach Hoa Xanh finds the most suitable model
Broadly, the size of Vietnam’s grocery market is over $50 billion, dominated by traditional groceries with about 80%, much higher than the level of no more than 50% in regional markets. such as Thailand, Indonesia and Malaysia. Meanwhile, modern grocery stores have been expanding their market share.
In urban areas, Kantar forecasts that Vietnam’s minimart and online sales channels will continue to expand their market share to 12% and 9% respectively by the end of 2025 from the current 8% and 5%. The motivation comes from the increasingly busier lives of Vietnamese consumers and the convenience factor of this sales channel. Similar trends are expected for rural areas.
Thus, BVSC believes that Bach Hoa Xanh is proving to be a beneficiary in the long-term story of the Vietnamese grocery market. Understanding the needs of consumers, Bach Hoa Xanh has conducted a restructuring, moving from a “modern” market model to a minimart form, specifically with the goal of serving customers who spend 15 minutes shopping for groceries. daily shopping cart. BHX’s exceptional offerings include convenient location, direct parking in front of the store, good customer service, and competitive pricing.
